Tidwell Chapter 11

London Naval Conference

1930, it was a meeting that began with the Washington Naval Conference of 1921, this meeting made an attempt to revise and extend the terms of the Five Power Treaty.

3c. What are some relief programs that Hoover's Democratic opponent might suggest?

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Hoover Dam

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2b. How effective was President Hoover's preferred approach to government in responding to the hardships of the Great Depression?

President Hoover's approach was not very successful due to the non-cooperation by the nation's top business leaders.

War Reparations Moratorium

a public statement issued by U.S. President Herbert Hoover on June 20, 1931, which he hoped would ease the coming international economic crisis, as well as provide time for recovery. Hoover's proposition was to put a one-year moratorium on payments of World War I and other war debt, postponing the initial payments, as well as interest.

Buying on Margin

buying stocks with loans from brokers, but only having enough money for part of it.

Margin call

ensured that brokers would get their loans repaid, and also meant that investors could be in big trouble if their stocks lost value suddenly. If a broker feels that they will not be getting their money back the will immediately call for their money back and the investor will have to sell the stock and give them what they owe them.

Rugged Individualism

individualism in social and economic affairs; belief not only in personal liberty and self-reliance but also in free competition.

Stock

is ownership in a company, and it is sold in shares

Federal Reserve System

serves as the nation's central bank. Established 12 Regional Banks across the country and was overseen by the FRB

Federal Reserve Board

the Federal Reserve Board takes actions and sets policies to regulate the nation's money supply in order to promote healthy economic activity. In the late 1920s, the Federal Reserve Board decided to make it more difficult and more costly for brokers to offer margin loans to investors. The Federal Reserve's move was partly successful, at least at first. Borrowing from banks by brokers began to decrease, but it was replaced by money from a new source.

Associative state

the term for President Hoover's vision of voluntary partnership between business associations and the government.

Gross national product

the total value of all goods and services produced in the nation in a specific period of time.

Cooperative

working with each other to reach a goal.

Order of how the stock market crashed

1. Huge numbers of people invested into stocks. Many of investors bought stocks in shares 2. Buying on credit had become popular trend. Most people had reached the limit and buying slowed down. 3. As the slowdown in purchasing had slowed down, jobs were cut/lost, local gov't stopped Building programs and consumers stopped spending. 4. The federal Reserve Board, seeing a weakness in the stock market due to so many margin purchases, made it more difficult for stock brokers to borrow from banks 5. When banks stopped loaning money for margin purchases some large American corporation began loaning money to brokers for margin purchasing 6. When stocks began to fall, some stock holders began to sell their shares for low price. Investors feared the market was going down. 7. On Thursday Oct. 24, 1929 a general sell off began causing even more people to sell and prices drop. Brokers began to make margin calls in order nor to lose their loans. The stock market stabilized in the afternoon after a group of bankers got together and purchased large amounts of stock. 8. On Tuesday 29, the stock market started to fall sharply, investors panicked and began to sell quickly trying to recover as much of their investment as possible. 9. By the end of Oct. 29, 1929 the market lost about half its previous value

Federal Home Loan Bank

12 U.S. government-sponsored banks that provide stable, on-demand, low-cost funding to American financial institutions.

Reconstruction Finance Corporation

A program that provided $2 billion in direct government aid to struggling banks and other institutions during the Great Depression

2. Explain how the onset of the Great Depression affected farmers?

Farmers were over producing their crops. With over production, the demand on crops wasn't as high and the prices dropped. With the depression people did not have enough money to spend on food. This made the demand drop even lower while the supply remained high.

Smoot

Hawley Tariff Act- high tariff law that contributed to a global economic downturn in the 1930's, put a high tax on imported goods.

Explain "Buying on Margin"

Here is how it worked: Imagine an investor wanted to buy 100 shares of stock in Company A at $10 a share. The total purchase price would be $1,000. To make this purchase, the investor would pay just a portion of the $1,000—say, for example, $500. The investor would borrow the other $500 from a stockbroker. The understanding was that the investor would pay off the loan when he or she sold the stock.

1a. What were two key ideas that helped shape Hoover's core beliefs?

Hoover's set of core beliefs were formed over a long career in business and government service. Rugged individualism and the ideas of business and government.

1b. In what ways were Hoover's basic beliefs similar to those of Presidents Harding and Coolidge?

Hoovers set of core values were formed from business. He has a pro-business type attitude similar to Coolidge and Harding. They both believed in little to no government interference in business.

2c. Defend Hoover's commitment to avoiding direct relief to individuals.

If Hoover were to directly help individuals those individuals would not be able to fend for themselves and end up only relying on the government for them to live. That would not work well in society for everyone to sit around while the government is the only one providing for the people instead of the people providing for themselves.

Roger Babson

In September 1929, economist Roger Babson sounded a warning note. "Sooner or later," he said, "a crash is coming, and it may be terrific." The crash he was anticipating was a sudden drop in stock prices, which could devastate those who had borrowed heavily to buy stock. Many experts, however, dismissed Babson's worries. In October, banker Charles E. Mitchell responded to the warnings of people such as Babson. Mitchell said, famously, "I see no reason for the end-of-the-year slump which some people are predicting." He could not have been more wrong.

How did the stock market crash?

Individuals- Most people who purchased on margin lost their investment and some lost even more than their investment and owed their brokers for loans Banks- banks that had loaned money for years to brokers for margin purchases were the hardest hit when those loans could not be repaid. More important people began to believe that their banks might close, a panic set in and people began to demand all their money from their bank, causing a run on the bank which did cause the bank go bankrupt and close. These conditions led to a banking crisis that would not be fully stopped until the late 1930's Businesses- the combination of customers slowing down on purchasing goods, Banks were soon unwilling to not loan money anymore and businesses with little money income had to start laying off jobs. The situation just aggravated the already slow economy by making purchasing even less.

What happens when people buy on margin...

Investors would buy stock and borrow money they needed for stock. Sometimes the value of the share would lose value and as they sell the stock they lose money. If they lose money they would not have enough to repay the brokers. If brokers didn't get money, banks didn't get money; if banks didn't get money, corporations didn't get money. Investors would sell their cars, houses, or anything to get the money they needed to pay off the brokers.

3a. What was the general reaction of the American people to Hoover's performance?

Many Americans questioned Hoover's compassion and his unwillingness to give direct relief to Americans it became less and less understood by Americans. His actions as President were questioned by many people and people began to attack him for his actions or inactions.

1. Explain why a bank failure in 1930 was so devastating to depositors?

People soon began realizing the stock market was falling and would attempt to withdraw their savings. As people withdrew, banks had less and less money. When banks became empty of money they would close. Those people who didn't withdraw their money in time would have no money. More than 140 billion dollars had been lost. There was no insurance on money in Banks. When the FDIC was created, insurance on deposits was made.

Stock Market Crash of 1929

On Thursday, October 29, 1929, some nervous investors began selling stocks. As others noticed the increased activity, they joined in the selling, afraid to be left behind. A huge sell-off had begun. With few people willing to buy the millions of stocks flooding the market, stock prices plunged, triggering an even greater panic to sell. Toward the end of this terrible day, a number of leading bankers joined together to buy stocks and prevent a further collapse in their prices. This effort succeeded in stopping the panic—for a time. The market returned to normal trading on Friday, and some stocks actually gained value. When traders returned to work on Monday, however, the good feelings from Friday had completely evaporated. As trading began that day, the market sank. The next day—Tuesday, October 29—was the worst of all (IBM and Ford Motor Company). As panic completely overcame the markets, investors dumped more than 16 million shares of stock. While the sell-offs of earlier days had affected mainly the stocks of weaker businesses, the collapse on Black Tuesday affected the stock of even the most solid companies. The damage was widespread and catastrophic. During October, the stock market dropped in value by about $16 billion. This represented nearly one-half of the market's pre-crash value.

Hoover

Stimson Doctrine- declared in 1932. It states that the U.S. government would not recognize any territorial expansions that are a result of forceful takeover. This was as a result of the takeover of the Japanese Army of Manchuria.

3. Explain how the weather played a role in the Great Depression?

The severe drought of the 1930's played a major factor of the Great Depression. With little to no rain the farms were not producing giving nothing to sell and no income on farmers. Then the spring winds come and blow off the top soil making farms virtually in farmable

Herbert Hoover

Thirty-first president of the United States; he helped save Europe from starvation after World War I but as president failed to deal effectively with the Great Depression. He was pro-business, and believed that it would soon go away.

Black Tuesday

Tuesday, October 29, 1929, the day that the stock market crashed

3b. How did Hoover's core beliefs contrast with what many Americans wanted?

While Americans wanted governmental interference to help aid people directly, while Hoover wanted aid the people as little as possible.

1c. What is your opinion about Hoover's belief in the importance of rugged individualism?

Your Opinion